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Nortel sells remaining patents for US$4.5B

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July 4, 2011
by Canadian Press

Toronto — Former Canadian technology giant Nortel Networks Corp. has auctioned off all its remaining patents to a consortium of software companies for US$4.5 billion. The consortium consists of BlackBerry-maker Research In Motion, Apple, EMC, Ericsson, Microsoft and Sony. RIM’s portion of the purchase is approximately $770 million.

It was not known how much each of the other companies paid. EMC would only describe the amount as “not material” to its overall finances.

The group prevailed over Google Inc., which had said it planned to bid $900 million in cash for all of Nortel’s remaining patents and patent applications. Phones running Google’s Android system compete with Apple’s iPhone and RIM’s BlackBerry devices.

In a statement Friday, Google general counsel Kent Walker called the outcome “disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers.”

Google had said it wanted the patents to defend itself against patent lawsuits from other companies until Congress enacts broader changes to the patent system to help reduce such litigation. Google gives away its Android software for free, counting on its wider use to drive usage of other Google services, such as search and maps.

The sale from a multi-day auction included more than 6,000 patents — the last of Nortel’s technology assets. The patent portfolio touches nearly every aspect of telecommunications, including Internet search and social networking.

The sale is subject to Canadian and U.S. court approval, which will be sought at a joint hearing expected to be held July 11. Nortel’s court protection from creditors had earlier been extended to Dec. 14, to give the company more time to complete the sale of its assets and other restructuring efforts.

“The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world,” said George Riedel, Nortel’s chief strategy officer.

Nortel had previously announced it did not expect its shareholders to receive any value from its creditor protection proceedings.

The patent auction, which was originally slated to take place June 20, had been postponed by one week as Nortel cited “the significant level of interest” in the sale.

Over the past couple of years, Nortel has sold its wireless network business to Sweden’s Ericsson for $1.13 billion and its enterprise solutions business to U.S.-based Avaya Inc. for $689 million, among others.

Ten years ago, at its height, Nortel was among the world’s most advanced developers of telecom equipment. But the company was felled by changing market conditions, economic upheaval and an accounting scandal that devastated its stock price.

Although Nortel was by far Canada’s largest spender on research and development, some of its work ended up as technological dead ends — at least temporarily — while at other times its innovations were so advanced that it would take years to determine whether they would be market winners.

Much of Nortel’s research and development was done in Ottawa, at a facility formerly known as Bell Northern Research, although Nortel also had research facilities around the world.